This action concerned an ongoing urban renewal project that proposed demolition of 83 buildings of historic interest in the downtown area of Waterbury, Connecticut. At the time the action was filed, many of the buildings scheduled for demolition had been destroyed, but some remained standing. The project was funded through a Department of Housing and Urban Development (HUD) loan and capital grant contract executed in 1973. The contract provided for work to be done in phases, each of which would require HUD's approval. Thus, demolition of the buildings required HUD's approval.

In May 1976, the grant recipient, the local redevelopment agency, forwarded to HUD the environmental information required under HUD's procedures, concluding that the project area contained no known significant historic properties listed in or being considered for nomination to the National Register of Historic Places. On the basis of this information, HUD concluded in its environmental review that there were no listed or nominated properties in the area and declined to prepare an environmental impact statement (EIS) under the National Environmental Policy Act (NEPA). HUD did not consult with the State Historic Preservation Officer (SHPO) or the Advisory Council on Historic Preservation and did not consider alternatives to demolition.

After HUD's environmental review was complete, the local agency sent HUD information on the potential eligibility of a carriage house in the project area, a structure that local citizens had pointed out to the SHPO as worthy of nomination to the Register. Although HUD believed that the carriage house was not eligible, it nevertheless requested a formal determination of eligibility for the Register from the Secretary of the Interior and ordered that no federally assisted activity occur on any structure in the project area until HUD could make a Register eligibility determination for the structure. In February 1978, the Keeper of the Register determined that the carriage house was eligible. Meanwhile, the Council and the SHPO both wrote to HUD suggesting that HUD evaluate the historic significance of the entire downtown district. In September 1978, HUD abandoned its historic review efforts and recommended that demolition of the buildings recommence.

Plaintiff, a citizens' organization, alleged that HUD had not complied with NEPA, the National Historic Preservation Act (NHPA), and certain regulations of HUD and the Council.

The district court held that plaintiff had standing to sue, a decision not challenged on appeal, and that laches did not bar the action because the buildings had not been demolished. The Second Circuit agreed, noting the public interest in preserving historic sites and the continuing nature of HUD's supervision over the project. 603 F.2d at 315-16.

The district court also held that the granting of approval for acquisition or demolition of a property is a "major Federal action" and that NEPA would apply as long as HUD had significant control over the project. Whenever new information, such as the potential eligibility of the carriage house, comes to light, HUD must again determine whether an EIS is necessary. If HUD should decide that Register-eligible properties would be affected, a detailed EIS would then be required. The Second Circuit agreed. Id. at 318, 326.

Addressing plaintiff's contention that HUD should have complied with Section 106 of NHPA, the appellate court, reversing the district court, found that the execution of the grant contract did not constitute final approval because the contract provided for subsequent approval in stages. The provisions of NHPA do not cease to apply simply because an agency has given preliminary approval for expenditures, but continue to apply until the agency has finally approved the expenditures of funds at each stage of the undertaking. Id. at 319. The court discussed at length the legislative history of NHPA, id. at 320-25, and found support for its decision in the Council's regulations implementing Section 106. Id. at 324. The court held that HUD must comply with Section 106 as long as HUD retained the authority to make funding approvals under the grant contract. Because HUD had not approved all stages of funding at the time the carriage house was determined to be eligible for the Register, HUD should have complied with Section 106. Id. at 326.

Subsequently, the parties undertook the consultation process established by the regulations of the Advisory Council on Historic Preservation implementing Section 106 of the National Historic Preservation Act (NHPA) and entered into a Memorandum of Agreement (MOA), which was signed on December 8, 1980. The district court dissolved its previously issued preliminary injunction in February 1981. Plaintiff then sought attorneys' fees and expenses under Section 305 of NHPA.

The threshold decision facing the district court was whether the case was "pending" on the effective date of the enactment of the attorneys' fees provision of NHPA, December 12, 1980, at which time all of the litigation had been completed and the MOA signed by all parties. The court concluded that the case was pending and that plaintiff could recover for services rendered during the entire controversy unless retroactive application of the attorneys' fees provision might result in "manifest injustice."

To determine if there was a possibility of injustice, the court looked to three factors: (1) the nature and identity of the parties, (2) the nature of the rights affected by the retroactive application of the law, and (3) the impact of changes in law upon existing rights or the possibility that new and unanticipated obligations could be imposed upon parties without notice or opportunity to be heard. 535 F. Supp. at 12. The court concluded that none of these concerns were applicable in this case because plaintiff had done a substantial service in protecting historic properties, the local agency had no unconditional rights to the public funds, and application of the attorneys' fees amendment did not change the defendants' obligations to comply with Federal statutes. Id. at 12-13.

Next, the court determined that plaintiff was an "interested person" who "substantially prevailed" in the action. Id. at 13.

The court then concluded that attorneys' fees could be levied against both the Federal and local Government defendants. The court rejected the Federal defendant's argument that attorneys' fees were prohibited by the doctrine of sovereign immunity, citing the legislative history of NHPA and the Equal Access to Justice Act. Id. at 13-14. Section 305 of NHPA applies to any local government that receives Federal money and can be said to be a "partner" with the Federal Government in the venture at issue. Id. at 14. That the State contributed funds to the city does not bar the award of attorneys' fees. The local government was not "an arm of the State" immune from suit under the Eleventh Amendment of the United States Constitution, but even if it were, the Eleventh Amendment would not bar an award of attorneys' fees when, as in this case, the fees are sought by a plaintiff who has secured prospective relief against State officials. Id. at 15.

Finally, to determine the amount of fees to award, the court considered the time and labor spent, counsel's experience and reputation, and the magnitude and complexity of the litigation. Id. The court awarded fees but reduced plaintiff's request because it found the requested fees to be excessive. The court ordered that responsibility for the fees was to be shared equally between the Federal and local agencies. Id. at 16.